The quarter ended March 2012 has not been stellar for many Indian IT companies. As Table 1 shows, Infosys did poorly, and even market leader TCS reported sluggish quarter-on-quarter revenue growth. Is there a trend towards slower or more volatile growth in the sector? Infosys, in its much-read guidance, suggested that it was going after “non-linear” growth, with productivity per employee increasing. Some suggest this means temporarily skewed results, following a focus on heavy, procyclical sectors like banking, financial services and insurance (BFSI). Yet, as Table 2 shows, net profit growth has been volatile for the past three years. (Click here for tables)

Analysts have focused on two questions. First, what is Infosys going to do with its cash pile? As Table 3 shows, it has not matched TCS in its dividend payouts over the past five years. However, as Table 4 illustrates, it is sitting on a considerable cash pile. Why is it stockpiling cash? Thus, the second, related analyst focus: changes in revenue streams geographically and by customer profile, in order to work out whether the Indian IT industry’s going through a lengthy transition. Infosys has seen a big fall in its North American business, and TCS in Europe, as Table 5 shows. Is this temporary or structural? A comparison with large American IT firms (Table 6) suggests hard times everywhere. Almost all the relevant divisions of US firms showed slow year-on-year revenue growth; and it is getting worse, with the last reported quarter particularly bad. As Table 7 suggests, Infosys’ focus on BFSI is less than other Indian majors, and indeed less than that of the relevant divisions of US firms. Volatility, thus, should perhaps be expected, but with downside enhanced: The CNX-IT index tracks this, but has been more volatile than the Nifty, as Table 8 shows, but it has underperformed the market since December — even though both have increased.